Do you have a HECS / HELP debt? We find out how Budget 2014 could affect you

27/05/2014 , 7:19 PM by Georgia Wilson

Andrew Norton was once an advisor to David Kemp, Education Minister in the Howard government, and he's now the Director of Higher Education Program at the Grattan Institute. He joined us today to discuss what the government's proposed changes might mean for you if you have an outstanding HECS / HELP debt. Here's a quick summary of what we learned.

Will the government's proposed changes affect me even if I got my degree years ago?Yes. The changes would apply to all outstanding HELP debt, so that affects both new and past students.

How likely is it that these changes will get through the senate and become law?Given what Clive Palmer, the Greens and Labor have been saying recently, the chances are relatively low that these changes will get through the new senate in their current form. However, we're yet to see this new senate in operation, so it's hard to say for sure.

If this goes ahead, how will the changes affect past students?

There are two main changes.

1) The threshold at which you start having to pay back your debt. On current trends, the threshold at which you start having to make repayments will be about $56,000 in 2016. The government wants to drop that back to $50,000 at a 2 per cent rate. So if you earn $50,000 your will repay 2 per cent of your entire income against your remaining HELP debt.

2) The interest charged on your debt. At the moment it’s pegged to the Consumer Price Index which averages about 2.5 per cent. Instead it’s going to be linked to the ten year bond rate (that’s the rate at which the government borrows money - which at the moment is around 3.5 or 4 per cent). At the moment that’s not going to lead to a dramatic increase, maybe one or a bit more than one per cent increase in the interest rate. But there is the potential for this to go up to six per cent which is the cap the government is setting. If you owe a lot of money, that could be a fairly hefty annual cost for you.

If I leave the country permanently, does the government still try to claim the debt?It might depend what country you go to. At the moment the government does not make you repay if you are living overseas, but there are a couple of firm signs that they are moving down that path. There are already negotiations with the British government for us to collect the debts of British students here, and for them to do the same for us. There’s already an agreement with New Zealand that we’re going to report on New Zealand student debtors here, and they would assist us if we go down this path.

What about if I die – does the government claim the debt back then?Currently the government doesn’t claim back your debt if you die.

What if I take time off work to have a baby?If you’re earning below the threshold during this time, you don’t have to make repayments. However, if the government's proposed changes go ahead, during time off from work the debt will be slowly climbing with this new interest rate. If you spend a long time out of the workforce with interest accruing every year on your debt, you could end up owing much more than you borrowed in the first place.

Often people have multiple careers in the space of their lifetime. What happens if I do multiple university degrees? Is there any discount?There is no discounting for multiple courses, it all adds up.

But I signed up for my degree thinking that my debt wouldn’t be subject to any significant interest. Isn’t that some kind of breach of contract?It’s unlikely there is any legal contract here – the government is within its legal rights to do this.

Image credit: Creative commons attribution share alike licen

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